The Hidden Tradeoffs of GOP Candidates

May 24, 2011

[Guest post by James Downie]

Last week, Ezra Klein suggested that perhaps the lack of enthusiasm among the GOP establishment for Tim Pawlenty lay in his unimpressive record as governor, including his reliance on "accounting shortcuts" to try to close the deficit, rather than actually cutting the size of the state government. Indeed, one of Pawlenty's favorite habits was shifting costs to local governments, as documented here:

Pawlenty oversaw dramatic reductions in higher-education funding and refused to spend more on early childhood programs. He allowed a slight increase in K-12 education, not accounting for inflation. In doing so, he shifted costs to local districts.

Local aid cuts can be like squeezing a balloon: states reduce their spending and hold down their taxes, but cities can be forced to increase their spending and raise their taxes. That is one argument being made in Minnesota, where a new Democratic governor, Mark Dayton, has been fighting cuts to local aid proposed by Republican lawmakers. The governor said aid to Minnesota’s cities had dropped by 24 percent since 2003 — and that two-thirds of the cuts were passed on to local residents in the form of higher property taxes.

The principle culprit behind statewide property tax increases since 2002 is the reduction in revenue the state shares with local governments. In constant 2010 dollars, state aid to local governments has fallen by $2.6 billion since 2002. In response, local governments have increased property taxes by $1.7 billion.

The truth is, though, that Pawlenty is not special. Every Republican governor put forward as a GOP white knight has these same problems, including Chris Christie in New Jersey:

Coupled with major proposed changes to pensions and benefits, Christie’s budget plans set the stage for sacrifice at all levels of government and local school districts, shifting the burden from the state...Christie is betting the way to cut expenses is to eliminate state mandates and let municipalities make the tough choices.

Conservative lawmakers who dominate Texas politics make their political careers on promising to cut state spending and block new taxes. But when the budget slashing is done, city and county officials must pick up the pieces – and possibly raise taxes. [...]

Texas lawmakers from both parties have always been fiscally conservative, explained Sherri Greenberg, interim director of the Center for Politics and Governance at the LBJ School for Public Affairs in Austin. Texas spends less per person on state services than any other state, and the Texas Constitution forbids a personal income tax.

“It’s one thing to say `no new taxes,’ however, that doesn’t mean there won’t be all kinds of fees increased,” Greenberg said. “Things are just pushed down to the local level.”

Cuts set off a domino effect: Historically, public schools raise property taxes when the state education agency sends smaller checks. Cities and counties have to pick up the bill when the sick go to the emergency room because fewer doctors accept Medicaid. And when the mentally ill don’t receive treatment, local law enforcement often steps in.

Fairfax Sheriff Stan G. Barry said a Virginia plan to rent 1,000 prison beds to other states to raise money is unfair to sheriffs who are left housing hundreds of state inmates waiting to be moved in already crowded local jails.

The Department of Corrections, Virginia's largest state agency, with more than 10,000 employees, expects to make up for $20 million in budget cuts by taking in 1,000 inmates from Pennsylvania before next month.

Barry said he understands that the state needs the money, but he called the plan a "shell game" because the state is shifting the burden to local governments.

Even Mitch Daniels had to resort to cost-shifting: Local property tax bills have increased by thousands of dollars during Daniels's time as governor, for example, thanks at least in part to Daniels slashing aid to school districts. And the trickery doesn't stop there: Pawlenty et. al. have also deferred payments to pension plans, enacted unconstitutional budget cuts, and even snuck in the occasional tax hike while still pretending they've only cut taxes. In a way, Republican governors face the same problem that GOP House members do: there is not a lot of fat in state government. Instead, to uphold their reputations without offending the far right, Republicans have had to resort to these budget games. Plausibility on fiscal discipline is not just a problem for Pawlenty; it's a problem for much of the GOP field.